America's most prominent group advocating engagement with Iran was hit with a rough court decision

U.S. Secretary of State John Kerry shakes hands with Iranian Foreign Minister Mohammad Javad Zarif before a meeting in Geneva January 14, 2015. REUTERS/Rick Wilking The National Iranian American Council (NIAC) has emerged as one of the most influential foreign policy advocacy groups in Washington and has helped affect an almost complete reversal in US policy towards Tehran.

In the decision, two circuit judges and a senior circuit judge forced NIAC to pay "$183,480.09 in monetary sanctions" to a blogger named Hassan Daioleslam to reimburse him for the money he's spent fighting a defamation lawsuit NIAC brought against him in 2008, and that was dismissed 4 years later.

"They sued me, and ran a smear campaign against me," Daioleslam told Business Insider. "They did everything to crush me. But after seven years of the lawsuit they couldn't break me."

NIAC is on the side of the Iran debate that's winning right now, at least in the executive branch. Its work is predicated on the idea that closer relations between the US and Iran are in the US' interests. The Obama administration clearly agrees, as the US and Iran are reportedly on the brink of a landmark nuclear agreement.

But when a critic claimed that NIAC was operating under a different mission — that it was lobbying on behalf of the government of Iran's interests — the group sued him. Despite filing that lawsuit, NIAC then used a series of delays that kept its activities hidden from the court.

In that suit, NIAC alleged Daioleslam — who runs a website called Iranianlobby.com, along with the Iranian American Forum— had "defamed them in a series of articles and blog posts claiming that they had secretly lobbied on behalf of the Iranian regime in the United States."

The accusation highlights a crucial distinction under US law. There's a major difference between lobbying on behalf of a foreign government — something that requires registration under the Foreign Agents Registration Act — and advocating in favor of closer ties with a country on the premise that this would advance US interests.

NIAC thought it had a case against Daioleslam. The US District Court for the District of Columbia disagreed, finding in 2012 that the work of NIAC president and founder Tritra Parsi was "not inconsistent with the idea that he was first and foremost an advocate for the regime." The judge essentially found it was conceivable that NIAC could reasonably be accused of lobbying on behalf of Iran, so Daioleslam's blog posts weren't defamatory.

Trita Parsi, founder of the National Iranian American Council with Dylan Williams from liberal Jewish organization J Street. NIAC / Sima Jafari

The case was far from over even after its dismissal. Daioleslam filed a motion for sanctions in order to recuperate some of the costs of the discovery process. He claimed that NIAC's various delays in cooperating with court orders had driven up the costs of his legal defense.

The Feb. 10 decision from the appeals court, written by judge Robert Wilkins, determined that NIAC had "flouted multiple court orders" and improperly delayed its delivery of documents to Daioleslam during the discovery portion of the lawsuit and even withheld certain documents. During the trial, the NIAC provided inconsistent statements about its internal computer system and recordkeeping, and then used those later-disproved claims to drag out the discovery process for years.

Remarkably, NIAC hoarded and shielded documents during the discovery portion of a lawsuit that it had itself brought to court.

If NIAC never wanted a federal judge to look over certain aspects of its operations — its member lists, internal emails, meeting schedules, and other documents the court deemed relevant to Daiolelslam's defense — it simply could have chosen not to bring a lawsuit at all.

But it made the worst possible choice: bringing a losing lawsuit, and then taking what the Feb. 10 finding describes as "inexcusable" action in court in an apparent attempt at protecting itself from the consequences of its own lawsuit.

Daioleslam told Business Insider that NIAC was generally uncooperative in providing requested documentation during the trial. "They gave 10% of what we asked for, and even that was enough to show what kind of organization it is," he said.

For Daioleslam, the decision is further vindication after beating a lawsuit that he claims cost NIAC more than $1 million in legal fees to pursue.

"They lied to the court and they were punished for it," Daioleslam told Business Insider.

Parsi disagrees: "The real story here is that Mr. Dai [Daioleslam changed his name to Dai since the suit began] and his neoconservative supporters — whose intent was to 'destroy NIAC' — utterly failed," he wrote in an email to Business Insider. "After spending several million dollars, going through our computers, not only could they not find a shred of evidence supporting their lie that we lobby for the Iranian government, Mr. Daioleslam also retreated from his accusation against us in court and ended up paying for the vast majority of the costs for his fishing expedition."

Daioleslam (aka Dai), for his part, told Business Insider that the trial's discovery costs came out to a little over $300,000, which means that the $180,000 reward in fact accounted for over half the costs incurred.

Here's what the court found:

NIAC really didn't produce its calendar records. Daiolelslam needed to show that it wasn't libelous to claim that NIAC was involved in lobbying on behalf of the Tehran regime. NIAC's calendar records, which showed what NIAC staffers were doing and who they were meeting with, were crucial to this line of defense. He requested them in March of 2009. One can only guess at the reason NIAC didn't want to hand them over.

"NIAC failed for ten months to produce Outlook calendar records for any of its employees in response to Daioleslam's production requests," the opinion states. Even when NIAC obliged him, the records were incomplete. Or worse: "NIAC produced no calendar entries from before 2009. Of the entries it produced, 78 had been altered shortly before production, including two-thirds of those in Parsi's calendar."

The judge writes that "a large proportion of the documents were modified shortly before production."

NIAC initially hid the existence of four of its computers from the court, and wasn't totally honest about what those computers were used for. In July of 2010, the court ordered NIAC to "submit the server on which its Outlook calendars are kept to PricewaterhouseCoopers ["PwC"] for forensic imaging." Awkwardly for NIAC, the imaging "revealed the existence of four additional computers in NIAC's network that it had not produced" in court.

NIAC claimed that these were intern computers. This was false: "The inventory showed that one of the computers NIAC had withheld as an 'intern computer' was actually used by [then-NIAC legislative director Emily] Blout, whose Outlook calendar entries NIAC had produced ... Another one of the 'intern' computers was actually used by NIAC's co-founder and former outreach director, Babak Talebi."

(In an email to Business Insider, Blout, who no longer works for NIAC, wrote that "While I am mentioned several times, I was not a party in the lawsuit and was not involved in NIAC's legal strategy or decisions. I do, however, regret Mr. Daioleslam's original attacks on my former employer, which in no way represents the Iranian regime.")

NIAC misrepresented how its computer system was configured. The court ordered NIAC to produce its computer server three times so that it could determine whether the group was withholding or altering documents. The multiple requests were necessary because NIAC initially claimed that such a server did not exist.

This was also false, and as judge Wilkins notes, "PwC's forensic imaging of NIAC's old server revealed hundreds of previously unproduced calendar entries."

Judge Wilkins is unsparing in his assessment of NIAC's various evasions regarding the architecture of its record-keeping system: "Its resolute failure to produce all relevant drives until over a year after it was first ordered to do so is inexcusable," the court found.

According to Wilkins's opinion, in withholding the servers, NIAC had actually "disobeyed a series of written orders" from the court.

NIAC didn't explain why it withheld 5,500 emails from its co-founder and former outreach director. Daioleslam reasonably believed that emails from Babek Talebi, NIAC's co-founder and outreach director, could help establish the nature of the group's work and aid in his defense. The court agreed, but NIAC delayed its release of the emails and then withheld thousands of them based on criteria that the court couldn't quite identify.

"NIAC produced virtually no documents from Talebi's NIAC email address in response to Daioleslam's production requests prior to late December 2009, even though Talebi had been involved with the organization since 2002," Wilkins writes. "After the court ordered NIAC to search its servers, NIAC located about 8,000 of his emails, but produced only 89 as relevant, and withheld the rest as not relevant."

The court didn't buy the argument that they were "irrelevant" and ordered NIAC to turn over the rest of them "consistent with [NIAC's] discovery obligations." They handed over an additional 2,500 emails, which means they withheld 5,500.

The court wasn't sure what criteria NIAC had used to hoard the remaining emails, holding "in an April 5, 2011 order that NIAC had 'totally failed' to assess the Talebi emails for responsiveness."

Worse still, when the emails were eventually reviewed by the court in private, "The court observed that many were plainly responsive to Daioleslam's requests for lobbying-related documents," and that "When Daioleslam finally received the remainder of Talebi's emails, he noted they included Congress-related communications that he could have used in his depositions of NIAC's employees. "

Overall, "the District Court described the Appellants' withholding of relevant emails as 'indefensible.'"

NIAC wasn't truthful about the nature of its record-keeping system. As Wilkins' decision recounts, "References to 'SF' in NIAC's belated April 2010 production of some of its Outlook calendar entries tipped off Daioleslam that it had also withheld meeting notes and membership lists it kept in a program called Salesforce."

NIAC audaciously responded that it had no idea what Daiolelslam was talking about, with its lawyers claiming the group "ha[d] not employed any such software or system and is therefore unable to comment about this unfounded claim."

That wasn't true, and in February of 2011, NIAC turned over Salesforce records that it had initially claimed in court had never even existed.

NIAC also misrepresented the extent of its Salesforce records when it first acknowledged their existence in September of 2010:

"NIAC told the District Court that it had only experimented briefly with Salesforce. However, Parsi conceded in his first deposition two months later that NIAC had used Salesforce 'to keep track on members and donations' since before 2006 and that, 'for a few years, we used it as the database in which we kept our membership information.'"

NIAC took 2 1/2 years to produce its membership lists. The court agreed with Daioleslam's claim that a list of NIAC's members was relevant to his defense, since the lawsuit hinged on allegedly defamatory and damaging statements about NIAC's nature and activities.

"Again, NIAC failed to comply meaningfully with the court's order, producing only a list of 9,000 Convio [a business management program] 'transactions' — mostly donations — from which a complete list of members was impossible to divine.

"At long last, in September 2011 — two-and-a-half years after Daioleslam's request for production of documents related to NIAC's membership — NIAC produced all its member lists."

NIAC didn't turn over lots of relevant documents. Awkwardly for NIAC, Daioleslam subpoenaed a number of third parties for NIAC documents that the organization itself had failed to produce in court.

These documents NIAC didn't produce — but that other parties possessed and were compelled to produce — included "a discussion of legal restrictions on lobbying by nonprofits, emails Parsi wrote to a National Security Council director, emails coordinating a congressional briefing, communications NIAC exchanged with its expert about NIAC events on Capitol Hill and meetings with foreign officials, and 168 emails NIAC received from Iranian-Americans expressing negative views of the organization."

The decision notes that "The Appellants made no attempt to defend their failure to produce these documents other than to say Daioleslam had found no 'smoking gun' among them."

An important document was mysteriously altered after the lawsuit was brought. Before launching NIAC, Trita Parsi was "affiliated" with a group called Iranians for International Cooperation. In a 1999 FAQ, Parsi "described IIC as a 'lobby group,'" according to Wilkins' decision.

That FAQ had a curious alternation.

"One version of the FAQ that Parsi produced — the metadata of which showed it was last modified in 1999 —retained this description [as a "lobby group']. The second version he produced replaced the word 'lobby' with 'advocacy,' and had last been modified in April 2009." NIAC sued Daioleslam in April 2008.

Iranian Foreign Minister Mohammad Javad Zarif talks with reporters before meeting with U.S. Secretary of State John Kerry in Geneva January 14, 2015. REUTERS/Rick Wilking Maybe NIAC's seeming lack of cooperation with the lawsuit wasn't malicious. It could be that NIAC was chronically disorganized. In its press release in response to the decision, NIAC pointed out that the appeals court had overturned some parts of the lower court's decision. (For example, the appeals court didn't uphold sanctions against Parsi for his mysterious alteration of the ICC document, finding there wasn't clear evidence he'd done so in bad faith.)

Still, the lion's share of the court opinion outlines NIAC's attempts to withhold information that gets to the heart of NIAC's goals and activities. At best, NIAC behaved poorly in court in the pursuit of a failed lawsuit against one of its critics. At worst, it waged a poorly concealed whitewash of what it had been up to for the previous eight years.

Judge Wilkins has only this to say about NIAC's possible motives: "In view of the Appellants' failure to explain their withholding of so many relevant documents, some of which they misrepresented to the District Court that they could not locate, we cannot conclude it was clearly erroneous to find the Appellants acted in bad faith."

Daioleslam has his own explanation for NIAC's actions: "They didn't want to give the documents because didn't want to expose the truth, that's all," he told Business Insider.

When reached for comment, NIAC president Parsi attempted to portray the ruling as a win for his organization. He claimed that his organization had not acted in bad faith in its slow response to various court orders, and cited another judge's finding that NIAC's delays may simply have been a result of "a lack of resources and carelessness." In an email to Business Insider, Parsi wrote:

"The real story here is that Mr. Dai and his neoconservative supporters — whose intent was to 'destroy NIAC' — utterly failed. After spending several million dollars, going through our computers, not only could they not find a shred of evidence supporting their lie that we lobby for the Iranian government, Mr. Dai also retreated from his accusation against us in court and ended up paying for the vast majority of the costs for his fishing expedition."

"We are disappointed that Judge Wilkins's opinion did not even address our primary argument: that Judge Bates overlooked his own ground rules for shifting the forensic-imaging costs, doing so even though Judge Bates determined that there was no evidence that NIAC had altered any of the disputed Outlook calendar entries and that he concluded that the entries Mr. Dai discovered through forensic imaging were not material to his summary judgment motion."

"Even Judge Bates, whose final ruling we respectfully disagreed with, still concluded that any alleged discovery failures on our end were "a product of lack of resources and carelessness more than bad faith." We respectfully disagree with the decision that even a small minority of the discovery cost should have been shifted to us, but are content with the moral victory that Mr. Dai had to retreat from his accusation against us in court."

NIAC expanded upon this defense — essentially that the court did not endorse Daioleslam's claims that NIAC was lobbying for the Iranian regime, thus eliding the fact that it was NIAC that brought the suit in the first place — in a statement published on March 5, roughly 24 hours after Business Insider first contacted Parsi for comment.

The statement notes that "Some confusion has arisen as to the nature of the opinion filed by Judge Wilkins on February 10, 2015 in the US Court of Appeals for the District of Columbia." That statement went on to point out that the judge who originally ruled on the case attributed its failure to produce documents more to "a product of lack of resources and carelessness more than bad faith."

UPDATE: Hassan Dai emailed the following to Business Insider in response to Trita Parsi's statements in this article: "Twice in the article, Parsi claims that during the lawsuit, I retreated from my previous declarations that Parsi lobbies on behalf of Iranian regime. This is an outright lie."

As proof Dai pointed to several "excerpts from the ruling, our motion and my deposition." In his deposition, Dai said he"believe[s] [Parsi] has worked, he has lobbied in favor of the Iranian regime." In the email, Dai also notes that he maintained the accusation Parsi lobbied on behalf of the regime in two motions filed at the outset of the case.